Plastic
Custom Research Services (PCRS) has researched and published several reports
since 1995 covering the North American industrial thermoforming business, most
recently in 2009. Over the period November 2012-January 2013 we revisited this
business, conducting a survey of 146 U.S. and Canadian thermoformers with 50%
or more of their formed output devoted to consumer and industrial products
other than packaging. One of our main objectives was to determine how these
companies fared during the Great Recession of 2008-2009 and its aftermath.
Secondly, in light of that experience, we wanted to ascertain what strategies
these companies were adopting to build their customer base and grow their sales
going forward.

We
knew from previous research that the regional industrial thermoformers enjoyed
vigorous growth in the 1990s. However, that growth dynamic faltered at the
start of the new century when the U.S. economy experienced the dotcom crash and
a minor recession. By 2003 sales of this group had recovered, and strong annual
sales growth resumed through 2007. Then came the Great Recession. Sales of this
group tumbled 14.4% in 2008, rebounded modestly in 2009, and then fell back
slightly in both 2010 and 2011.

By
2011 the aggregate value of sales of regional industrial thermoformers was
slightly less than $2.7 billion. Our survey suggests sales rebounded 3% in 2012
to reach $2.75 billion. Yet looking to 2013 less than half the survey
respondents (45%) foresee an increase in their sales of industrial products
whereas the other 55% foresee either no change, a slight sales decline, or
there’s simply too much uncertainty in the current political economy to
speculate as to how their sales will evolve in 2013 and beyond.

The
factors influencing the financial welfare of regional industrial thermoformers
are both endogenous and exogenous. The process provides relative ease of entry,
so there are many small, under-capitalized players usurping market share. The
process also yields few economies of scale expanding individual plant
operations, which leads to a proliferation of plants with insufficient scale to
meet evolving market demands. Then there are challenging external forces at
work. The scope for thermoformers must be viewed in the context of the market
environment in which they operate. First of all, since the turn of the century
the U.S. economy has ratcheted down to a lower long-term structural growth
rate. Household formation has slowed, and this has dampened demand for many
durable goods the industrial thermoformers rely on for their sales. Secondly,
globalization has adversely impacted all regional plastics processors – blow
molders, injection molders, rotomolders, thermoformers – competing in the
structural plastic part market space. And obviously foreign plastics processors
compete in this market space as well.

Our
sense is that regional industrial thermoformers need to re-evaluate their
business models going forward. There are several major and niche industrial
product markets with good current and future growth prospects; we identify many
of these markets. Secondly, companies with a mix of custom and proprietary part
programs seem to have weathered the recent economic storm reasonably well.
Thirdly, we foresee a future where OEMs will exercise a preference for
structural plastic part suppliers with multiple plastics processing capabilities
as well as extensive secondary operations conveying additional aesthetic and
functional value-added. Finally, we encourage regional industrial thermoformers
to explore export opportunities beyond North America insofar as the global
economy has been growing and will continue to grow faster than the regional
economy.

ABOUT THE AUTHOR

Dr. Peter J. Mooney is the
founder and president of Plastics Custom Research Services (PCRS). Dr. Mooney
holds a Ph.D. in economics from the University of North Carolina at Chapel
Hill, and he has covered the plastics industry as a technical/economic market
research analyst and consultant since 1981. He is a member of several plastics
industry associations including the Society of the Plastics Industry (SPI), the
Society of Plastics Engineers (SPE), and the Association of Rotational Molders
International (ARMI). He is also a member of the National Association of
Business Economists (NABE). Since 2008 he has served as secretary and assistant
newsletter editor on the board of directors for the SPE Rotational Molding
Division (RMD). He has researched and written almost 100 multi-client reports,
as well as over 100 single-client reports for domestic and global companies. In
addition he has organized, chaired, and made presentations to numerous domestic
and global conferences addressing critical issues confronting the domestic and
global plastics industry.